Soochow: First coverage of LUK FOOK HOLD (00590) with a "buy" rating. Comprehensive coverage of multiple brand matrix across various niche markets.

Soochow issued a research report stating that LUK FOOK HOLD (00590) is one of the leading jewelry retailers in China, Hong Kong, and mainland China. It was listed on the Main Board of the Hong Kong Stock Exchange in 1997 and successfully acquired the controlling stake of King Fook Holdings in 2024, further enriching the group's multi-brand matrix. It is initiating coverage with a "buy" rating. Key points from Soochow include: - By the end of FY2025, the company had over 3,100 retail points in 11 countries and regions globally. - In FY2025, the company achieved revenue of HK$13.34 billion, a year-on-year growth rate of -13.0%, and net profit attributable to shareholders of HK$1.10 billion, a year-on-year growth rate of -37.8%. By the end of FY2025, the company had inventory of gold and platinum/priced jewelry of HK$5.46/5.28 billion, with year-on-year growth rates of +22.9%/+3.0%, benefiting from the rise in gold prices. - Revenue from China, Hong Kong, and Macau accounted for over half of the company's total revenue, with impressive performance in individual store revenue. - By business segment, in FY2025, the company's retail/wholesale/brand businesses achieved revenues of HK$11.03/1.41/0.90 billion, with year-on-year growth rates of -13.5%/-8.8%/-12.6%, accounting for 82.7%/10.5%/6.8% respectively. Profit margins were 9.3%/1.0%/69.2%. By region, the company's revenues from mainland China, Hong Kong, Macau, and overseas were HK$5.27/8.07 billion in FY2025, with year-on-year growth rates of -0.2%/-19.6%, accounting for 39.5%/60.5% respectively. Profit margins were 11.0%/13.5%, with average individual store revenue of HK$1.66/74.70 million. - The multi-brand matrix covers various segments of the gold jewelry market, meeting the diverse needs of consumers. The core brand, Lukfook Jewelry, has 2,805 stores globally by the end of FY2025. In November 2024, the company launched the "Ice Diamond Light and Shadow Gold" series using CNC color technology, successfully creating a flagship product. In April 2025, the company invited actor Cheng Yi as the global brand ambassador for Lukfook Jewelry, with significant promotional effects; meanwhile, the company expanded the King Fook brand, which had 239 stores by the end of FY2025. - The company continues to expand its mainland channels while exploring overseas markets. As of the end of March 2025, LUK FOOK HOLD had a total of 3,287 stores in China, including mainland China, Hong Kong, Macau, and 11 other countries and regions. The company plans to enter 3 new countries and regions over the next three years (FY2026-FY2028) and add a net of 50 overseas stores. In FY2026, the company plans to add a net of 20 overseas stores. In the mainland China market, the company is opening various styles of stores and actively developing e-commerce channels through collaborations with celebrities, IP endorsements, etc., to enhance brand promotion and sales conversion. - Profit forecast: LUK FOOK HOLD is a leading jewelry retailer in China, Hong Kong, and mainland China with a comprehensive multi-brand matrix covering various segments of the gold jewelry market, meeting the diverse needs of consumers. Since FY2026, the company's performance has steadily improved, with same-store performance continuously increasing, demonstrating the company's strong brand power. The bank forecasts the company's net profit attributable to shareholders for FY2026-FY2028 to be HK$1.52/1.73/1.93 billion, with year-on-year growth rates of +39%/+13%/+12 %. The latest closing price corresponds to a PE ratio of 10/9/8X for FY2026-FY2028. Risk warning: slower-than-expected growth in the domestic consumption market, significant fluctuations in gold prices, slower-than-expected store expansion, and overseas brand expansion falling short of expectations.